NOTE 3.  ACQUISITIONS 

 

Acquisitions in 2012:

 

POC Sweden AB

 

On July 2, 2012, the Company acquired all of the issued and outstanding shares of capital stock of POC Sweden AB (“POC”), a Stockholm-based developer and manufacturer of protective gear for action sports athletes pursuant to the terms of the Share Transfer Agreement (the “Agreement”) dated as of June 7, 2012, and as amended on July 2, 2012 (the “Amendment,” and together with the Agreement, the “POC Agreement”), by and among the Company, Ember Scandinavia AB, a Swedish corporation and a wholly owned subsidiary of the Company, and the shareholders of POC (the “Sellers”).  Under the terms of the POC Agreement, the Company acquired POC for a total consideration valued at 311,300 Swedish kronor (SEK) or $44,917 through the delivery to the Sellers of $40,569 in cash and 460 shares of Black Diamond common stock, par value $0.0001 (the “Black Diamond Shares”).  The Black Diamond Shares issued at closing are subject to a lock-up agreement (the “POC Lock-up Agreement”) restricting sales for two years and are pledged to the Company as security for indemnification claims under the POC Agreement.  The Company’s actual closing stock price was $9.45 on June 29, 2012, the last closing stock price prior to the completion of the POC acquisition.  Because the Black Diamond Shares issued to the Sellers are subject to a two-year lock-up pursuant to the POC Lock-up Agreement, a discount of $1.21  (12.8%) was applied against the $9.45 closing stock price to yield a fair value of $8.24 per share.  The 12.8% discount was calculated using the Finerty model with a two-year term and a volatility of 40.5%.  

 

PIEPS Holding GmbH

 

On October 1, 2012, the Company acquired all of the issued and outstanding shares of capital stock of PIEPS Holding GmbH and its subsidiaries PIEPS GmbH and Pieps Corporation (collectively, “PIEPS”), a leading Austrian designer and marketer of avalanche beacons and snow safety products pursuant to the terms of the Share Purchase Agreement (the “PIEPS Agreement”) dated as of September 24, 2012, by and among the Company, ADMIN BG Holding GmbH (to be renamed Black Diamond Austria GmbH “BD Austria”), an Austrian corporation and a wholly-owned subsidiary of the Company, and the Seidel Privatstiftung (the “Seller”).  Under the terms of the PIEPS Agreement, the Company acquired PIEPS for a total consideration valued at 7,959 Euros (“EUR”) or $10,265 in cash (after closing adjustments of 41 EUR or $53 relating to working capital).  The Company has also committed up to an additional 2,300 EUR or approximately $3,000 of contingent purchase price upon PIEPS’ achievement of certain sales targets between April 1, 2012 and March 31, 2015, which may be paid at the Company’s discretion in cash, shares of the Company’s common stock, or a combination of cash and such shares. Using the discounted cash flow method, the Company estimated the value of the contingent consideration to be $121.  Black Diamond has guaranteed the obligations of BD Austria under the PIEPS Agreement.

 

 

The Company believes the acquisitions of POC and PIEPS are expected to provide the Company with the following significant benefits: 

 

 

The following table is a reconciliation to the fair value of the purchase consideration and how the purchase consideration is allocated to assets acquired and liabilities assumed which have been estimated at their fair values.  The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill. 

 

 

The amount of POC’s accounts receivable deemed to be not collectible was $115.  The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts.  The debt assumed as part of the Company’s acquisition of POC consists of (i) a line of credit with an outstanding balance of $1,277 with a variable interest rate of 4.2%, which matured on December 31, 2012, (ii) a term note of $865 with an interest rate of 9.2%, which was subsequently reduced to 6.0% on October 10, 2012, and which matures on November 30, 2014 and (iii) $171 in capital leases and other debt.

 

The amount of PIEPS’ accounts receivable deemed to be not collectible was $17.  The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts.  The debt assumed as part of the Company’s acquisition of PIEPS consists of (i) a line of credit with an outstanding balance of $1,024 with a variable interest rate of 4.7%, which matures on May 31, 2014, (ii) a line of credit with an outstanding balance of $383 with an interest rate of 2.8%, with the balance due on demand (iii) a factoring line of credit with an outstanding balance of $201, with a variable interest rate of 2.5%, which matures December 31, 2013, and (iii) a term note with and outstanding balance of $109, with a variable interest rate of 3.4%, which matures December 31, 2014.

 

In connection with the acquisition, the Company acquired exclusive rights to POC’s and PIEPS’ tradenames and trademarks.  The intangible assets, other than goodwill, acquired and related weighted average useful lives are as follows:  

 

The fair value of POC’s and PIEPS’ assembled workforce and buyer-specific synergies has been included in goodwill.  There is no amount of goodwill that is expected to be deductible for tax purposes. 

 

Pro Forma Results 

 

The following pro forma results are based on the individual historical results of the Company and POC and PIEPS, with adjustments to give effect to the combined operations as if the Mergers and acquisitions had been consummated at the beginning of the periods presented.  The pro forma results are intended for information purposes only and do not purport to represent what the Company’s results of operations would actually have been had the Company’s transactions in fact occurred at the beginning of the earliest periods presented. 

 

 

Acquisitions in Prior Years:

 

Black Diamond Equipment, Ltd.

 

On May 28, 2010, the Company acquired BDEL, a Delaware corporation, pursuant to the Agreement and Plan of Merger dated May 7, 2010 (the “Black Diamond Equipment Merger Agreement”), by and among the Company, BDEL, Everest/Sapphire Acquisition, LLC (“Purchaser”), a Delaware limited liability company and a wholly-owned direct subsidiary of the Company, Sapphire Merger Corp. (“Merger Sub”), a Delaware corporation and a wholly-owned direct subsidiary of Purchaser, and Ed McCall, as Stockholders’ Representative.  Under the Black Diamond Equipment Merger Agreement, Purchaser acquired BDEL and its three subsidiaries through the merger of Merger Sub with and into BDEL, with BDEL as the surviving corporation of the merger (the “Black Diamond Equipment Merger”).

 

Gregory Mountain Products, Inc.

 

On May 28, 2010, the Company acquired GMP, a Delaware corporation in a merger transaction (the “Gregory Merger”, collectively with the Black Diamond Equipment Merger, the “Mergers”) pursuant to the Agreement and Plan of Merger (the “Gregory Merger Agreement”), by and among GMP, the Company, Purchaser, Everest Merger I Corp., a Delaware corporation and a wholly-owned direct subsidiary of Purchaser (“Merger Sub One”), Everest Merger II, LLC, a Delaware limited liability company and a wholly-owned direct subsidiary of Purchaser (“Merger Sub Two”), and each of Kanders GMP Holdings, LLC and Schiller Gregory Investment Company, LLC, as the stockholders of Gregory (collectively, the “Gregory Stockholders”).